Top hospital execs get big pay alongside high pressure - The Buffalo News

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Top hospital execs get big pay alongside high pressure

Thomas J. Quatroche Jr. saw a nice pay raise earlier this year when he was named CEO of Erie County Medical Center.

His $725,000 salary puts him in a salary league with other top hospital executives in the Buffalo Niagara region, although he didn’t surpass most of them.

Joseph D. McDonald of Catholic Health System received $1.4 million in 2014.

Candace S. Johnson, the top executive at Roswell Park Cancer Institute, will earn slightly more than $1 million this year, about the same amount Jody L. Lomeo of Kaleida Health was paid in 2014.

Pay for hospital executives can be a sensitive issue, especially during contract negotiations with nurses and other employees. For about two hours one day last month, workers at Mercy Hospital of Buffalo, Kenmore Mercy Hospital and Sisters of Charity Hospital St. Joseph Campus – who have worked without a contract for as long as 10 months – marched with a custom-made, inflatable “fat cat,” clutching a nurse by the neck, outside the Catholic Health System’s headquarters.

But compensation consultants say the executive pay at the local health organizations are in line with national averages for midsize and larger hospital systems.

The chief executive officers oversee the region’s largest medical centers that employ thousands of workers, care for tens of thousands of patients and bring in up to $1 billion in revenue annually.

They must navigate complicated regulations, engage in sometimes-testy negotiations with labor unions and withstand growing financial pressures as government and commercial payers seek to rein in health care spending.

As for Quatroche’s pay deal, the head of ECMC’s board remains confident that board members made the right decision to promote him and pay him accordingly.

“We’re mindful – and you know I’ve been on the board a long time, so I’m more mindful than many others might be – as to what kind of consequences we could pay if we’re not careful of how we make these types of decisions,” Sharon L. Hanson, chairwoman of ECMC’s board, said of the board’s deliberations on Quatroche’s contract.

Quatroche’s package

Quatroche received a $125,000 raise over his predecessor, to $725,000 annually, upon taking the top job at ECMC, a 602-bed hospital with the region’s elite trauma center.

He had served as acting president and CEO since November, after the board abruptly removed Richard C. Cleland as CEO.

ECMC board members cited Quatroche’s steady performance in the role as a key reason for making the appointment.

Quatroche previously spent 10 years as ECMC’s senior vice president for marketing, planning and business development until May 2015, when he was named president and Cleland was named CEO.

ECMC provided his employment contract late last month in response to a Freedom of Information Law request.

The contract runs from Nov. 3, 2015, when Quatroche was named acting CEO, through 2019.

Beginning Jan. 1, ECMC can adjust Quatroche’s compensation based on performance.

Starting in 2018, his pay must increase by at least 3 percent annually.

Quatroche also is entitled to family health and dental insurance, though he must pay 10 percent of the cost; $500,000 in life insurance; long-term disability insurance; 25 paid days off a year; at least nine paid holidays a year; and $5,000 toward business-education and technology expenses.

He also gets retirement benefits available to state workers, because ECMC is a state public benefit corporation.

If terminated without cause, Quatroche would be entitled to severance equal to two years’ salary. The contract also has a two-year, no-compete clause.

Coveted executives

Boards of directors at the institutions consider the compensation for the right top executives as money well spent.

Experts say few executives have the required skill set and experience to fill these posts. Those who do are highly coveted, and when hospital boards find their preferred candidates, they reward them with generous salaries, incentive opportunities and benefit packages.

“It’s one of the worst supply-demand imbalances I’ve ever seen,” said Jerry Newman, a nationally known compensation expert at the University at Buffalo Management School.

Most of the provisions in Quatroche’s contract are typical for a top executive at a health care facility of ECMC’s size. ECMC employs the equivalent of nearly 3,200 full-time employees. In 2015, ECMC had $542 million in revenue, 18,378 patient discharges and 67,296 emergency room visits.

ECMC also operates Terrace View long-term care facility.

ECMC officials said Quatroche took on two roles – president and CEO – and that’s one reason he deserved the raise from Cleland’s $600,000 salary.

ECMC cited a 2015 report from Sullivan, Cotter and Associates – which it used in setting Quatroche’s pay – which calculated a median base salary of $727,000 for a president and CEO of a single-hospital system with revenues between $400 million and $900 million. That figure doesn’t include the value of additional compensation and benefits.

It’s rare for a one-campus hospital to split up the duties of a CEO and president, said Alexander Yaffe, president and CEO of Yaffe & Company, a consulting firm that advises hospitals, universities and other nonprofits on compensation matters. Its clients include Upper Allegheny Health System, which is made up of Olean General Hospital and Bradford Regional Medical Center.

Yaffe said large, multi-site systems often have a CEO – sometimes with the added title of president – who oversees the entire network with a president for each individual hospital.

Other pay packages

Johnson, Roswell Park’s top executive, received a base salary of $775,000 in 2015, but earned an additional $662,000, according to SeeThroughNY. Roswell Park said her pay that year included age-triggered deferred compensation, performance-related bonus and benefits.

In 2016, her total compensation totaled slightly more than $1 million.

McDonald of Catholic Health received $1.4 million and Lomeo of Kaleida Health earned $1 million in 2014, respectively, according to IRS filings.

Lomeo, in his first year as head of the region’s largest hospital system, received a base pay of $771,444 and also $221,993 in retirement and other deferred compensation and $6,706 in nontaxable benefits.

Three former executives earned at least $900,000 in the most recent year for which records are available: Kaleida Health’s James Kaskie, $1.65 million; Mount St. Mary’s Judith A. Maness, $977,547; and Roswell Park’s Dr. Donald L. Trump, $922,129.

At least four other current area hospital executives earned $500,000 or more in total pay in the most recent year for which their compensation is available.

Yaffe said hospital boards typically structure executive compensation to include a base salary, an opportunity to earn performance-based compensation and additional benefits including retirement benefits, life insurance and perquisites such as free use of a car or a country club membership.

The combination of those items, and the value of each item within the overall package, will depend on the particular executive, he said. An executive who doesn’t have a family may not value life insurance, Yaffe said, while an executive who is closer to the end of her career will value retirement benefits more. To a large extent, the size of the institution, as determined by patient volume, number of beds and revenue, drives pay.

More incentives

More hospitals are using incentive payments are part of their compensation packages for CEOs, said UB’s Newman. The incentive payments are based on the hospital reaching certain financial, construction or operational goals. They may be stretched over a year or more.

“Health care has been a late rider into this whole process, and the reason they’re getting into it now is because there’s been this huge push for quality of care, including patient feedback about the quality of care, and cutting down the number of readmissions in hospitals,” Newman said. “And those kinds of things are very susceptible to measurement and, therefore, very susceptible to incentive compensation.”

Hospital executives face regulatory and budgetary challenges at a time of industry transformation: the push to put electronic health records in place, address changes required in the Affordable Care Act, shift from a fee-for-service reimbursement model to one that rewards value and to navigate consolidation within the health care market.

Seven-figure pay rates draw the ire of hospital union members, especially during protracted contract negotiations. But few executives can successfully address those challenges, Newman and Yaffe said. So turnover is high.

“That talent is fewer and farther between,” Yaffe said. “And so boards are actively pursuing the talent that they need and making sure that they hold onto them and making sure that they are tied to achieving those objectives. Or they are going to move on to someone else.”

...Executive compensation packages for local health care execs

Joseph D. McDonald, $1.4 million, Catholic Health System (1,096 beds, Year 2014)

Candace S. Johnson, $1 million Roswell Park Cancer Institute (133 beds, Year 2016)

Jody L. Lomeo, $1 million, Kaleida Health (988 beds, Year 2014)

Timothy J. Finan, $939,024, Olean General Hospital and Upper Allegheny Health System (293 beds, Year 2014)

Thomas J. Quatroche Jr., $725,000, Erie County Medical Center (602 beds, Year 2016)

Joseph A. Ruffolo, $502,303 Niagara Falls Memorial Medical Center (171 beds, Year 2014)

email: swatson@buffnews.com

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